CONTRACT OF INDEMNITY

BY –
SURBHI WADHWA
Assistant Professor (Law)
Jiwaji University,
Gwalior
 DEFINITION
• According to Section 124 of
the Indian Contract Act,
1872, a contract by which
one party promises to save
the other from loss caused
to him by the contract of
the promisor himself, or by
the conduct of any other
person, is called a contract
of indemnity.
 Example
‘A’ contracts to
indemnify ‘B’ against
the consequences of
any proceedings which
‘C’ may take against
‘B’ in respect of a
certain sum of Rs. 200.
This is a contract of
indemnity.
 Parties
• The person who gives
the indemnity is called
the ‘indemnifier’ and
the person for whose
protection it is given is
called the ‘indemnity
holder’ or
‘indemnified’.
 Meaning
• ‘To indemnify’ means to
make good the loss of
another in certain events.
• Indemnity is a security
against or compensation
for loss, etc.
• A contract of indemnity is
a kind of contingent
contract.
• It is an original and direct
engagement between two
parties whereby one
promises to save another
harmless from the result of
the conduct of the
promisor or of any other
person.
• The general principles of
the law of contract are
applicable to a contract of
indemnity.
• Thus, consideration or
object of an indemnity
contract must be lawful.
• For example, an
agreement by an accused
to indemnify the person
who has given bail is illegal.
• Under the Indian Law, the
scope of indemnity is
restricted to cases where
there is promise to indemnify
against loss, caused –
– By the promisor himself,
– By any other person.
• Thus, the definition excludes
from its purview cases of loss
arising from accidents like
fire or perils of the sea.
 Case Law
• In Dugdale v. Lovering,
(1875) 32 LT 155, the
plaintiffs were in possession
of certain trucks which
were claimed both by the
defendants and one K.P.
Co. the defendants
demanded delivery and
the plaintiffs asked for an
indemnity bond, but
received no reply.
• Yet, they delivered the
trucks to the defendants. It
was held that the
defendant was liable to
indemnify the plaintiff as
the indemnity bond led to
the creation of an implied
promise.
English Law
• The English definition of
indemnity is wide enough
to include a promise of
indemnity against loss
arising from any cause
whatsoever, for example,
loss caused by fire or by
some other accident.
Insurance Contracts
• Contracts of insurance, which are
the commonest examples of
contracts of indemnity under the
English law, are not contracts of
indemnity under the Indian
Contract Act.
• In English Law indemnity is
restricted to those cases only in
which the loss which is sought to
be reimbursed, is caused by the
conduct of the promisor or any
other person. The loss must be
such as the promisor has taken
upon himself to indemnify.